Implications of Interest We Pay on The National Debt
Happy New Year everyone.
Today I want to discuss the interest we pay on our national debt and the impact that interest expense has on the Federal Budget and the implications for future tax rates if we don't start paying off the debt soon.
The total Federal debt is currently 9.2 Trillion Dollars. That total includes foreign holdings of treasuries and obligations owed to Federal Trust Funds. To put that number in perspective, as of July 2007 there was an estimated 301,140,000 people in the US. So, each person's share of the debt is $30,551. The average yearly salary in the US for 2006 was $37,078. Using those numbers 60% of wage earners couldn't afford to pay off the debt with 100% of one year's after-tax income. Total Federal receipts for FY2006 totalled 2.4 Trillion. So, even the government would need more than 4 years of total receipts to pay off the debt. You're beginning to see why it's critical we start paying it off before there is no other option but to default.
Now, let's look at interest payments on the debt. For FY2006 the interest we paid totalled $406 Billion, which amounts to 16.9% of the total Federal Receipts. That equals $1348. each American owes in interest on the National Debt per year. Do you know anyone who spends 16.9% of their yearly income on interest payments? I didn't think so. No one can afford to live like that.
We Are All The Government in that we freely elect our officials and voluntarily pay the taxes that are our government's sole source of revenue. Therefore, the appropriate question should be not how much can government afford to spend but how much can we afford to pay? Many people are currently losing their houses because they overestimated their ability to pay if the house stopped rising in value. The government makes the same faulty assumption when increasing the Federal Debt every year. Officials assume that someone will always buy the Treasury Bonds we need to sell to meet our obligations. We, as a country, could theoretically lose our "house" if investors do not continue to buy as many bonds as we need them to.
Just how much of our "house" could we lose? In FY2006 the Federal Government collected $2.41 Trillion in total receipts. However the Federal Government spent $2.66 Trillion. The deficit for the year was $250 Billion which equals $830. per person for FY2006. Add to that the $406 Billion in interest payments we owed that year and we arrive at a total of $656 Billion or $2178. per person. That total is the extra that every American had to pay in FY2006 in order to balance the Federal Budget, and pay the interest on the National Debt, without adding any principle to the debt. If we didn’t each want to pay the $2178 another option would have been to CUT Government spending by 24.6% in FY2006. When we reach critical mass I assume the solution will be a compromise of some sort, for example each American pays $1500. extra and Government cuts spending by 15%.
You’re probably asking, so why is all this important? Can’t the government just sell more bonds or print more money? They can and do but with 9.2 Trillion already outstanding, more than 4 times the Government’s annual income, they’re stretched pretty thin and investors buying our bonds are starting to realize that and "diversify" their holdings into Euros and other investments. Some say we’ve almost reached world saturation with US bonds and could begin seeing revenue shortfalls as government won’t be able to sell as many bonds as it needs to. And increasing the money supply dramatically won’t happen either as M3 has already been growing far faster than GDP for years as we can all tell with the dollar trading near an all-time low against other world currencies. More dilution will only send the dollar lower and send oil and everything else we import higher.
Many people will tell you there’s no way the Federal Government would ever default. I’m saying it’s a real possibility. Congress can’t even cut the rate of growth of their programs so how will they ever enact real cuts? And none of them want the economy to go into recession, especially in an election year so we’ll no doubt see some special incentives this year to help consumers, homeowners, and the stock market. And banks will need taxpayer help as well because one of them failing would send the market and economy into a tailspin. What all this adds up to is higher deficits. But the actual deficits will run much higher because tax collections will suffer as the housing bust continues, the economy skirts with recession, and the stock market falls.
When all of this smoke clears in a year or two, we’ll owe 11+ Trillion and interest alone will be 25-30% of the yearly budget and growing. Since the government didn’t make the hard choices when they could there will be no choice but more deficit spending. The party will finally stop when no one shows up for the bond auctions because everyone already holds as many US bonds as they want. Then a balanced budget will be a necessity because the only source of funding for the Government will be tax revenue. Now, what if this scenario happens when Social Security, Medicare, and the Federal Pension Plan need to start redeeming bonds, the government gave them in years they ran surpluses, to meet obligations? The government won’t be able to sell any new bonds so they would have to either cut spending further or raise taxes to honor the obligations to the Federal Trust Funds.
The only rational and responsible choice for us to make is to immediately CUT government spending by as much as needed to balance the budget and pay the interest on the debt. Otherwise, every year the Debt and Interest payments will increase. Now it is manageable. We could cut 24.6% of Government spending and still survive and even thrive. But, if we wait until the day when we have to cut spending by 50% to pay the interest and balance the budget, those cuts will likely be too painful to ever happen until we default on out Debt. And taking an immediate 25% cut is much better than the consequences of us defaulting.
Rob.
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1/21/2012 4:57 AM
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I think that you also have to examine the break down of the national debt. Although I'm not saying the government hasn't been fiscally irresponsible, I do think that the large sum of money our nation owes is a little misleading. You have to examine the maturity and age of many of those debts. Older loans are being paid off every single day and new ones are being taken out.
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The ideal tee position is to have half the ball showing above the clubface and to have it set near to your left heel (right heel if you’re left handed). If you tend to slice tee the ball up higher and vice versa if you tend to hook.
So try and stay unified whilst concentrating on using your body to create the momentum like an uncoiled spring. Before long you’ll be booming that driver like Tiger.
When setting up stand at least shoulder width apart. Consider widening your stance even further as you want to have a stable platform for what is the most energetic swing in golf. Stand more upright than you would with your irons with your hands dangling down just ahead of your chin. Ensure your shoulders are parallel to the target and lean slightly to the right. It should feel as though there is perhaps 60% of your weight on your right foot. This last point will help you create more power.
As you begin the backswing think long and wide. At the quarter point you want your hands to be as far from your body as possible. This long shaft is
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September 1968, in order to implement the Shanghai Machine Tool Works founder of the Since then, June 27, 1970, the CPC Central Committee approved and transmitted the soldiers, students, and decided to more than two schools in the pilot. Spring of 1972, Peking University, Tsinghua University National University admissions pilot experience in large scale.
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historical background of the history of schooling in 1966, the Cultural Revolution swept through the country, the basic types of schools by all levels, closed, approximately a million tall educate graduates have lost the opportunity to partake in academy entrance exam. In this course, an intervene our natural entrance is ten years. July 21, 1968, Mao Zedong's I am here chiefly to say that science and engineering campus ought do, merely to abbreviate the educate system, schooling revolution, to proletarian politics in command, take the Shanghai Machine Tool Plant workers train technical workers from the road. from practical experience in workers and laborers culling of students to educate a few years after, returned to production in practice. This corridor came to be understood as the The next day, Editor's Note language said the report In September, in mandate to appliance the Shanghai Machine Tool Works author of the Since then, June 27, 1970, the CPC Central Committee ratified and transmitted the infantry, students, and resolved to extra than 2 schools in the pilot. File to make sure the student's mission is to farmers and soldiers, At Peking University, for example, while students were officially registered (excluding short courses) 2392, its entry class of education were: lofty school 171, junior 2142, basic school 79. Spring of 1972, Peking University, Tsinghua University admissions experience of the pilot colossal space colleges and universities across the country. In 1973, the State Council agreed This recruitment prototype has been stretched to 1976. Statistics show namely from 1970 to 1976 the country's aggregate institute enrollment of about 82 million laborers and soldiers. Tsinghua University, which matriculate a total of 7 years, 6 th student to graduate in 1981, the last term, schools in producing graduates 16,353 people; of which 13,671 were regular classes, education classes 2469, specialist classes 213. Although these students behind graduation to resolve the peasants and soldiers, cadre status, merely their salary namely lower than before the Cultural Revolution of the undergraduate school, only the equivalent of college students enrolled before the Cultural Revolution. Reform and opening up, and the corresponding undergraduate degree and employment in China has gradually become an momentous reference ingredient approved compensation, some colleges and universities to re-examine later, peasants and soldiers to graduate school students an undergraduate diploma replacement. Background In 1973, China's Cultural Revolution years in aReply to this
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Featuring ultra-thin wall technology that provides more strength and lighter overall weight, as well as a more aerodynamic head shape, the TaylorMade Burner SuperFast driver produces more distance through more speed. Its larger, more expansive clubface inspires confidence at address and provides more forgiveness than ever before. It is 14 grams lighter than its predecessor,Nike SasQuatch Sumo2 5900 Driver, which creates faster clubhead speeds and more distance.
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Featuring a new flat white crown that reduces glare and improves alignment, the Burner SuperFast TP 2.0 driver from TaylorMade has a 460cc titanium head with a longer, lighter shaft and weighs only 279 grams for maximum clubhead speed. Its enhanced aerodynamics package removes the Dual Crown in favor of a drag-reducing rounded crown and lowered sole for optimal trajectories. For more forgiveness, TaylorMade has given this club the largest face of any TaylorMade driver to date at 4550 cubic mm. The TP model has upgraded shaft options over the standard model.
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Accuracy/Forgiveness: The center of the clubface is easy to find, which is mighty helpful when trying to correct directional misses.
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